Along with rate increases, the Fed is reducing the size of asset
holdings on its nearly $9 trillion balance sheet. Beginning in
June, the Fed began allowing some of the proceeds from maturing
bonds to roll off.
The balance sheet has declined just $16 billion since the
beginning of the roll-off, though the Fed set a cap of up to $47.5
billion that potentially could have been wound down. The cap will
rise through the summer,
eventually hitting $95 billion a
month by September. The process is known in markets as
“quantitative tightening” and is another mechanism the Fed uses to
impact financial conditions.
Along with the accelerated balance sheet runoff, markets
expect the Fed to raise rates at least another half percentage
point in September. Traders Wednesday afternoon were assigning
about a 53% chance the central bank would go even further, with a
third straight 0.75 percentage point, or 75 basis points, increase
in September, according to CME Group data.
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IMO, it's the pace that
Posted by pmahoney on 27th of Jul 2022 at 04:07 pm
IMO, it's the pace that has barely begun of QT that investors should be looking at going forward.
https://www.cnbc.com/2022/07/27/fed-decision-july-2022-.html
Along with rate increases, the Fed is reducing the size of asset holdings on its nearly $9 trillion balance sheet. Beginning in June, the Fed began allowing some of the proceeds from maturing bonds to roll off.
The balance sheet has declined just $16 billion since the beginning of the roll-off, though the Fed set a cap of up to $47.5 billion that potentially could have been wound down. The cap will rise through the summer, eventually hitting $95 billion a month by September. The process is known in markets as “quantitative tightening” and is another mechanism the Fed uses to impact financial conditions.
Along with the accelerated balance sheet runoff, markets expect the Fed to raise rates at least another half percentage point in September. Traders Wednesday afternoon were assigning about a 53% chance the central bank would go even further, with a third straight 0.75 percentage point, or 75 basis points, increase in September, according to CME Group data.